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Education and Employment References Committee
Corporate avoidance of the Fair Work Act 2009
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Education and Employment References Committee
McKenzie, Sen Bridget
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Content WindowEducation and Employment References Committee
Corporate avoidance of the Fair Work Act 2009
AKERS, Ms Bridget, Senior Solicitor, Employment Law, Combined Civil Law Specialist Team, Legal Aid NSW
Evidence was taken via teleconference—
CHAIR: Welcome. I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. I now invite you to make some opening remarks. At the conclusion of those remarks, I will invite members of the committee to put questions to you.
Ms Akers : I would like to start by thanking the committee for the opportunity to provide evidence on the important issue of corporate avoidance of the Fair Work Act. There is significant demand in the community for free legal advice about employment law issues. Since the inception of the Legal Aid of NSW's employment law practice, its services have been in high demand.
Employment law is the third most common civil law issue which clients seek advice from Legal Aid NSW about. To date, in the 2016-17 financial year, Legal Aid NSW has provided 2,522 employment law advice services and conduced 30 matters under a grant of legal aid. In the 2015-16 financial year, Legal Aid NSW provided 3,425 employment law advice services and made 40 grants of aid in employment law matters.
Legal Aid NSW provides civil law services from all of its legal aid offices in locations such as Dubbo, Orange, Wollongong, Lismore, Port Macquarie, Tamworth and Coffs Harbour. Solicitors based in regional offices also provide advice at 160 outreach locations.
Given the demand for employment law services, Legal Aid NSW also has a specialist employment law team that practices exclusively in employment law. The employment law team conducts approximately 20 specialist employment law clinics per month in locations such as central Sydney, Parramatta, Liverpool, Fairfield, Penrith and Newcastle.
In addition to advice services, where a client has received a grant of legal aid, Legal Aid NSW represents clients in forums such as the Fair Work Commission and the Federal Circuit Court. Where a client is not eligible for a grant of legal aid but is vulnerable and unable to self-help, Legal Aid NSW may provide some minor assistance, such as calculating a small underpayment, drafting an unfair dismissal claim or writing a letter of demand.
Our clients are some of the most vulnerable workers in the Australian workforce and include migrant workers, including former refugees and workers on temporary visas; casual employees and employees of labour hire companies; workers with disabilities; workers who are pregnant; workers with poor literacy; workers who are indigenous; workers who are under 25 and over 55; and workers in regional and remote areas. Given our engagement with vulnerable workers, we are well placed to speak about the exploitation that we observe these workers to experience.
Underpayment of wages and entitlements is the most common employment law problem that clients come to Legal Aid NSW about. To date, in the 2016-17 financial year, Legal Aid NSW has provided advice to over 1,000 clients about problems with wages and entitlements. Of course, a client will often have multiple employment law issues, and it is not at all unusual for our clients to have been potentially unfairly dismissed and underpaid wages and entitlements.
Our submission highlights a number of ways in which we have observed our clients to have been exploited in work. We observe that use of labour hire arrangements is common and the purpose of these arrangements appears to be to circumvent key protections of the Fair Work Act. Employees of labour hire companies cannot bring unfair dismissal or general protection claims against the host organisation if their assignment ends, and they are not eligible for redundancy payments if their assignment ends.
Our clients who are on temporary visas are often particularly vulnerable to exploitation. Our clients' employers threaten to stop sponsoring them or to tell the Department of Immigration and Border Protection that they are working in breach of their visa conditions if they complain about conditions of employment, including being underpaid. We see clients engaged in sham contracting arrangements, clients who have been required to become franchisees and clients who are required to incorporate companies. It is our experience that clients are engaged in these arrangements to avoid the safety nets intended to be provided by modern awards and the NES.
What is common in most of the forms of exploitation that we have outlined, whether it is sham contracting, engagement of workers via a labour hire agency or underpayment, is how practically difficult it is for most workers to pursue their rights. Here is a very common scenario that confronts Legal Aid NSW employment lawyers in almost every employment law clinic: a client comes to Legal Aid NSW with a concern that he or she might have been underpaid. If the client is a member of a union or is sufficiently tech savvy to have found the website of the Fair Work Ombudsman and to have called the Fair Work Infoline, he or she may know what award and classification applies to him or her. However, many clients will not be aware of the relevant award or classification before coming to Legal Aid NSW. The client tells the Legal Aid NSW lawyer, for example, that he or she worked 10 hours per day and regularly worked on weekends and public holidays. Our client might have pay slips and time sheets to support their claim. However, very often, our clients have never received pay slips.
A Legal Aid NSW lawyer may assist the client by drafting a letter to the employer requesting that, in accordance with the Fair Work Act, it produce employee records. Sometimes the employer will produce these records, but very often the employer will not produce the records or will produce records that appear to have been created at the time of making the request for records. Even where the client has complete records, he or she then has the complex task of accurately calculating the underpayment and preparing the court documents necessary to commence the claim.
Similarly, sham contracting claims are difficult for clients to pursue without legal representation. Whilst it is a relatively simple process to lodge a nondismissal general protections claim in the Fair Work Commission, pursuing a sham contracting claim in the Federal Circuit Court requires clients to navigate complex case law to make arguments about why, having regard to all of the relevant factors, their work relationship bears the indicia of employment rather than of independent contracting. As we note in our submission, we consider that there are changes in the law and to the processes of agencies like the Fair Work Ombudsman and ASIC that could assist workers to exercise their legal rights. Thank you.
Senator McKENZIE: On page 5 of your submission you talk about unfair dismissal rights against the host around labour hire employees. That is something that the committee has been considering. I was just wondering if you could flesh out for us in more detail how that might work and what might be a potential remedy.
Ms Akers : We see the claim as working similarly to the current unfair dismissal process that an individual has against their employer. We consider that there would need to be a qualifying period, like an amount of time that the employee had been placed at the host—so possibly a six-month threshold or a 12-month threshold—similar to an unfair dismissal claim. We see the claims operating in the same way—that where the assignment ends for reasons connected to the employee's performance that the employee said are harsh, unjust or unreasonable, that they should be able to make a claim directly against that host entity about the ending of their assignment.
Senator McKENZIE: We have also heard evidence around employers using state law, such as partnership laws. I am a Victorian senator, so we gave up industrial relations issues to the feds a while ago. Could you outline if that has been an issue within New South Wales?
Ms Akers : Whether there has been engagement of labour hire employees in a partnership?
Senator McKENZIE: Yes—constructing a partnership arrangement and then not being deemed as employees.
Ms Akers : The Fair Work Act would cover partnerships that are constitutional corporations in New South Wales. It is not something that we have ever seen in our employment law clinics or in our practice.
Senator McKENZIE: Thank you.
CHAIR: Of the many thousands of cases you have indicated you deal with and the 30 matters you ultimately took to court, I am wondering why the workplace ombudsman did not pick up the cases that needed to be prosecuted, given that I guess your level of resources is not commensurate with theirs.
Ms Akers : It is difficult for me to comment on that. I guess that the Fair Work Ombudsman has limited resources. Sometimes it may have been because our cases involved an individual rather than being industry-wide, but I cannot speculate. Often we will write to the Fair Work Ombudsman about our matters, and they have taken on some matters in particular cases. As to why they did not take all of them—not all of them would have been matters that would have been eligible. Grants of legal aid are available for unfair dismissal claims as well as for general protection claims and underpayment claims, so there would have been a proportion of those claims that the ombudsman could not have taken.
With the other proportion, as I understand, one of the things the ombudsman looks for is a systemic effect of their litigation so, if we had one very significant case, that may not have been enough for the ombudsman to take up the matter.
CHAIR: Do you engage with them about the cases you are going to take up, and the outcomes of them? Probably more generally, what sort of engagement do you have? Obviously, with the number of cases you are talking about, the inquiries you get, that is quite significant.
Ms Akers : Yes. We meet regularly with the ombudsman. We regularly advise our clients to make complaints to the ombudsman. If we see significant matters that are either outside of legal aid guidelines or that legal aid does not have capacity to take on, we might refer those matters to the ombudsman. We are certainly in regular discussion with them.
CHAIR: Okay. You probably do not want to offend them, but do you find them responsive to your needs?
Ms Akers : As we tried to indicate in our submission, we see an awfully large number of clients who have been underpaid, sometimes relatively small amounts. We understand that the ombudsman has a really large jurisdiction and has particular resourcing constraints.
CHAIR: I know that one of your recommendations is that consideration be given to the establishment of a well resourced, dedicated unit within the Fair Work Ombudsman's office to investigate claims of exploitation of workers on temporary visas. Do I take it from that that you believe not enough is being done by the regulator in the industry? I do not mean suggesting that in a negative way; it is purely an observation you could make.
Ms Akers : Yes, I think it would be fair to say we think that more could be done. A better resourced ombudsman could do more, particularly in that migrant worker space.
CHAIR: You talked about the effectiveness of the National Employment Standards and modern awards as a floor, and some of the ways employers seem to get around that if they wish to get around it—by engaging workers as independent contractors, franchisees or a business. Out of the thousands of complaints you get each year, how common is that?
Ms Akers : It is very common indeed. The most common would be sham contracting. I mean, most weeks in our employment law clinic we would see a worker who comes to us and says, 'I worked under an ABN and I invoiced them.' Sometimes they would be presented with an independent contracting agreement, whereas the employee would be working for just on or sometimes under minimum wage. They have all the indicia of employment. Equipment will be supplied, they will be told what to do, where to go and they will have to ask if they need to have days off—complete indicia of employment. That is quite common.
CHAIR: What sort of industries are they in?
Ms Akers : We see lots of people in the cleaning industry and lots of people in the construction industry. We are increasingly seeing some kinds of white-collar work moving to this model as well. I think the submission we mentioned a couple, like receptionists at doctors' surgeries we have seen. Most frequently it is cleaning and construction, I would say. The other types of engagement we see less frequently, but they still come up relatively regularly.
CHAIR: Just because I am thinking forward to our report, all those case studies are in fact studies you have dealt with and people that have come to you for help. They are not provided as anecdotal examples.
Ms Akers : That is correct, yes.
CHAIR: I think Senator McKenzie touched on this earlier. You said you were 'increasingly seeing situations where employees are requested or required by their employer to set up a proprietary limited company'. That is not something someone who is easily exploited would be capable of doing without some sort of assistance, I would have thought.
Ms Akers : That is sort of the nub of the problem. It will often be the company or the company's accountant who actually in substance sets up the company. I think in the example we referred to, the individual who became the director of the company was in fact illiterate. No, individuals often cannot do that without the assistance of the unscrupulous notional employer who sometimes becomes a parent company.
CHAIR: Can I just come back again to your list of complaints. I think I have this right. Generally, out of the complaints they get the ombudsman find that around half of them are proven. They either result in mediation or a letter of demand. I think you said you had 2,522 complaints last year. What is the breakdown of successfully resolved, not resolved and not really proven complaints?
Ms Akers : The 2,522 were employment law services—that is, the people who came to legal aid with an employment law problem. Some of that might have been about bullying and some of that might have been about an unfair dismissal, so that is not just underpayment. I think I did have the stats on underpayment—no, I did not. I just said it was the most common kind of matter we see. I can only give you my anecdotal sense of it, and that is that most matters are not resolved via the Fair Work Ombudsman complaint because it is a voluntary mediation process. Where the Fair Work Ombudsman does investigate, very often the employer will decline to participate in mediation, and then, most frequently, the Fair Work Ombudsman only provides information and does not assist further. Then the person has to decide whether they will take a small claim to court, and they may or may not be eligible for legal aid in that process. So I would say that most underpayment matters that we see do not settle and end up having to be pursued; they certainly do not settle before commencing litigation.
CHAIR: That does seem to be a flaw with the ombudsman's powers, doesn't it? I would have thought, if someone has made a claim and the ombudsman—or whoever is acting on behalf of the ombudsman—accepts, on the balance of probabilities, that the complainant is making a genuine complaint, they ought to be able to pursue that to the end result, because what might seem a small amount to someone on a salary like mine is a matter of eating for some other people at the very low end. If it is wage theft, it is wage theft, regardless of the amount of money. Do you see that as a major obstacle?
Ms Akers : Yes.
CHAIR: This is a very long-winded question, so please feel free, but does it give employers comfort that, if they simply put the shutters up and say, 'Not interested in talking to you,' the chances of someone then taking them to small claims for a small amount is really infinitesimal?
Ms Akers : Yes, I think you are absolutely correct. These are things that we observe every day: that employers do just put the shutters up, as you say. One further point to note is that the lack of records is such a difficulty for our clients. The employer's noncooperative response or action will have started much earlier in that either they will not have provided the records to the employee to successfully base a claim in response to a request or they will never have given them to them. So employees are in a really difficult position, and you are right: without the Fair Work Ombudsman having determinative or more coercive powers, they are really at a loss to try and pursue their claim themselves.
CHAIR: If they had the coercive powers, would they be able to insist upon the mediation? Another bill that is before the Senate now is about giving the ombudsman powers to compel people to give evidence to them. Will that actually help resolve this matter if the employer still says, 'I am not going to go to mediation; you cannot make me'?
Ms Akers : I suppose it might depend on the terms of any particular amendment, but it would probably not be enough just to be able to compel mediation, because that would not compel settlement; it would just take us one step closer or bring the employer to the forum. Possibly the ability to make determinations would be a useful power.
CHAIR: A number of people have suggested to us that where employers have not, or say they have not, kept records—as they are required to do under the Fair Work Act—it should revert, legally, to a reverse onus of proof, so whatever claim the employee makes the employer is then obliged to disprove it. Do you think that would help?
Ms Akers : Yes, I think that would be a measure to really be welcomed, particular given the obligations on employers under the Fair Work Act to keep employee records. If they have not done so, it does seem appropriate that the onus shift to the employer to disprove the employee's claim.
CHAIR: Of the 30 matters you took to court, how many were successful?
Ms Akers : I would need to take that on notice.
CHAIR: Again, I know you are an organisation that is strapped for resources, but, if you were able to break down the figures that you gave us in total over the last couple of years into different categories—whether it was unfair dismissal, just an inquiry about bullying et cetera—we would appreciate that. That would be useful to us.
Ms Akers : Yes, certainly. Our system has some constraints, but I will provide the best breakdown that I am able to.
CHAIR: You have a couple of case studies about visa issues. We are all reading about the changes that were announced yesterday. I am not going to ask whether you think the changes will make a material difference. Can you point out some glaring weaknesses in the visa monitoring system? And, if different people were given obligations to do certain things, would it assist in removing some of the exploitation?
Ms Akers : Some of the real problems include lack of oversight. Once workers come to Australia, one of the problems is the information that they are provided about their rights to work in Australia, awards, minimum rates and penalty rates, and there is the fact that employees are sometimes removed from the country and then cannot pursue their rights, so employers can engage in some of these practices with impunity because the client practically cannot bring underpayment claims or other claims related to their employment.
CHAIR: One of the things that has concerned the committee is that, with all the publicity of 7-Eleven and some of the other major companies and all the internal and external audits that have been done, it seems, based on what this committee has been told, that some of the franchisees for 7-Eleven are continuing with the practices that have been so well discredited. It is mind-boggling that this would continue in such a public way. I am answering my own question, but I guess that really demonstrates the enormous vulnerability that these people are exposed to and the desperation not to lose their visa or be seen to be defaulting on their visa arrangements. When people come to you in these circumstances, what is their state of mind about making complaints like this?
Ms Akers : They are usually quite afraid to do so, particularly when they do not have a secure visa. They are very hesitant to make the claim. They are particularly hesitant when they have been forced into the difficult position of working in breach of their visa conditions. Some workers—not all workers—do not understand the Australian legal system and what is required. They do not even have conception of what is required to prove an underpayment or bring an underpayment claim. People are desperate. Their usual first concern is their ability to continue to stay in Australia. The underpayment for their work falls shortly after that.
CHAIR: Something this committee identified many years ago under a previous government was that, when international students were coming, people seriously underestimated the cost of living in Australia and people came with expectations that they would be able to manage, and families had that expectation. I do not think the weakness was properly addressed by the previous government, nor has it been addressed by the existing government, so I am not pointing the finger at anybody. Do you think it is still the case that people come and are forced to work in breach of their visa arrangements because the alternative is starving, I suppose, or being homeless?
Ms Akers : I think that is absolutely true, and it is still something that we observe. It is a comment that we made in our submission—that genuine students, who come to Australia thinking that they will be able to support themselves by working, find that the cost of living is much greater than they expected it to be. That is how they find themselves in these difficult arrangements where they work longer hours than they are supposed to.
Senator McKENZIE: Thank you for raising that international student issue. It has been one that this committee, across a lot of different chairs, has been following with concern. Have you had any clients that have been through the gig economy or who have used apps to source labour? Do you have any advice for us around those issues?
Ms Akers : Yes, we have seen some individuals who have been engaged by Uber. We have not seen other workers in the gig economy as yet. To speculate as to why that might be, it may be because of all the articles that have been in the media about the blurred line between independent contracting and employment; these agencies really seem alive to that line and walk it very closely. Alternatively, it may just be that these employees are not alive to their rights and have not found legal aid yet.
The comment that I would make is that, as we say in our submission, agencies or entities that work in this space are very aware of the relevant guiding principles about the distinctions between an independent contractor and an employee. They seem to make an effort to style the relationships, in form, as independent contracting, to the extent that they can.
CHAIR: Thank you, Ms Akers. Thank you, particularly, for your submission. We have had a number of submissions from legal-aid-type agencies across the country. They have all been of an incredibly high quality, backed up by real case studies with real consideration given to what needs to be done. Yours is certainly no exception to that, so I do want to particularly thank you because I know you guys run on the smell of an oily rag, and the committee has certainly valued your contribution in written form and your presentation today.
Ms Akers : Thank you very much.
CHAIR: Thank you. The committee is now adjourned.
Committee adjourned at 12 : 03